1. Operations Management
For Competitive Advantage
Technical Note 9
Facility Location

2. Facility Location Issues in Facility Location
Various Plant Location Methods 2

3. Competitive Imperatives Impacting Location
The need to produce close to the customer due to time-based competition, trade agreements, and shipping costs.
The need to locate near the appropriate labor pool to take advantage of low wage costs and/or high technical skills. 3

4. Issues in Facility Location
Proximity to Customers
Business Climate
Total Costs
Infrastructure
Quality of Labor
Suppliers
Other Facilities
Little notes for GIS 4

5. Issues in Facility Location
Free Trade Zones
Political Risk and Political Stability
Government Barriers
Trading Blocs
Environmental Regulation
Host Community
Competitive Advantage 8

6. Plant Location Methodology: Factor Rating Method Example
Two refineries sites (A and B) are assigned the following range of point values and respective points, where the more points the better for the site location.
Sites
A B
Major factors for site location
Pt. Range
123
150 54 24 45 34 8
156
100 63 96 55 14 4 50 20
Best Site is B
Total pts 9

7. Plant Location Methodology: Transportation Method of Linear Programming
Transportation method of linear programming seeks to minimize costs of shipping n units to m destinations or its seeks to maximize profit of shipping n units to m destinations. 10

8. Plant Location Methodology: Center of Gravity Method
The center of gravity method is used for locating single facilities that considers existing facilities, the distances between them, and the volumes of goods to be shipped between them.
This methodology involves formulas used to compute the coordinates of the two-dimensional point that meets the distance and volume criteria stated above. 10

9. Plant Location Methodology: Center of Gravity Method Formulas
Cx = X coordinate of center of gravity
Cy = X coordinate of center of gravity
dix = X coordinate of the ith location
diy = Y coordinate of the ith location
Vi = volume of goods moved to or from ith
location 12

10. Plant Location Methodology: Example of Center of Gravity Method
Center of gravity method example
Several automobile showrooms are located according to the following grid which represents coordinate locations for each showroom. X Y A
(100,200) D
(250,580) Q
(790,900)
(0,0)
Question: What is the best location for a new Z-Mobile warehouse/temporary storage facility considering only distances and quantities sold per month? 11

11. Plant Location Methodology: Example of Center of Gravity Method: Determining Existing Facility Coordinates X Y A
(100,200) D
(250,580) Q
(790,900)
(0,0)
To begin, you must identify the existing facilities on a two-dimensional plane or grid and determine their coordinates.
You must also have the volume information on the business activity at the existing facilities. 12

12. Plant Location Methodology: Example of Center of Gravity Method: Determining the Coordinates of the New Facility
You then compute the new coordinates using the formulas: X Y A
(100,200) D
(250,580) Q
(790,900)
(0,0)
New location Z 13